Extraordinary Exaggerations
Donald Trump and the “Fairy Tale” of Real Estate Accounting
I’ve read the very long filing in which New York Attorney General Letitia James says she’s got evidence showing that former president Donald Trump and his family real estate business inflated the valuation of their assets for the purposes of acquiring loans, insurance coverage, and tax deductions in what appears to be a pattern of fraud. (James says the investigation is on-going and has not decided whether or not to bring civil charges.)
From the Supplemental Verified Petition filed by New York Attorney General Letitia James.
“Thus far in our investigation, we have uncovered significant evidence that suggests Donald J. Trump and the Trump Organization falsely and fraudulently valued multiple assets and misrepresented those values to financial institutions for economic benefit,” James said.
A spokesperson for the Trump Organization has said the claims are baseless.
An example of Trump’s alleged “falsehoods”: In financial statements dated 2015 and 2016, the value of Trump’s NYC apartment was based on the calculation that it was 30,000 square feet, instead of its actual size of 10,966 square feet. Banks relied on the statements—which, as the filing points out, “overstated by almost a factor of three” the value of the apartment—when determining whether to grant Trump and his company loans and insurance. According to the filing, in his own testimony, long-time Trump Org CFO Alan Weisselberg “admitted that this amounted to an overstatement of ‘give or take’ $200 million.”
Most people will rightly be horrified to read this.
But in the world of real estate, which I’ve written about for over a decade, exaggerating your net worth is completely commonplace, particularly when seeking funding or marketing. (It’s also commonplace for real estate developers to sing a different song to the IRS. Typically, their accountants write complex disclamatory cover letters explaining the discrepancies. We don’t know what Trump’s said.)
I phoned around to some of the biggest developers in America these past 24 hours to gauge their reaction to the Attorney General’s filings, and the general reaction, unbelievably, was: “This behavior is not particularly surprising or interesting. Possibly, he went too far.”
The reason for this is that, though Trump’s exaggerated claims may be more extreme than most, what he’s done is essentially exactly how the “game” (and I don’t use that word loosely) of real estate works. And nearly all the players in it—particularly banks and financial institutions who have dealt with Donald Trump over the years—understand it and play it. They are complicit.
Donald Trump leaves Trump Tower in Manhattan on July 19, 2021. (Photo by James Devaney/GC Images)
For example, a former senior banker at Deutsche Bank, which loaned Trump $640 million to finance Trump International Hotel & Towel in Chicago, has told me that when he and his colleagues received Trump’s financial statements, they were so “comical” and “absurd” that he threw them in the garbage. Nonetheless, Deutsche Bank loaned Trump millions—and, though the process of repayment was far from simple (see here), they didn’t lose money from the deal, as far as they know.
Another person closely associated with Trump’s financings over the years once described one of Trump’s pitches to me as “a complete fairytale.” Yet this person still does regular business with him.
And as for getting the square footage wrong? You’d be amazed at the inventive ways people come up with for “measuring” buildings. In all my reporting, I’ve never come across a building that stayed the same size over the years according to its marketing material, even if the building itself didn’t change a square inch. In fact, if some buildings were actually as big as the marketing material said they were, they would have spilled over the sidewalk.
Other “tricks” of the trade include skipping Floor 13 but still saying you have 25 floors instead of 24. And numbering penthouses, and so on. “The area for fudginess is huge,” a seasoned real estate executive told me yesterday.
The critical question for James is whether Trump’s hyperbole crossed the line. Say, for example, he certified a set of facts—as opposed to his own opinions—that he knew to be incorrect and that inaccuracy cost an institution financially? From what James filed, that is unclear. So we shall have to see.
But as an explainer about the culture from which the Trumps come, …well, read me!
My 2014 book about the world of New York real estate—in which Trump has been head-quartered for most of his career—is not called A Story of Good and Honest People. It’s quite deliberately called The Liar’s Ball, named after the colloquial name for the annual industry party. With reason.
The people who do business with Trump expect to be presented with a fairytale—and they spin their own, too.
There’s a scene in The Liar’s Ball in which I describe how when Trump was secretly readying to make a bid for the General Motors building in partnership with Conseco, an insurance company, the two then-heads of Vornado, the massive real estate firm with which Trump is still in partnership, showed up for breakfast at Trump’s penthouse apartment. Vornado CEO Steve Roth and Vornado President Mike Fascitelli were anxious to bid on the GM building themselves.
The General Motors (GM) building at 767 Fifth Avenue in New York. (Photo by James Leynse/Corbis via Getty Images)
Fascitelli and Roth asked Trump point-blank: Was he interested in buying the GM building? The reality was that Trump had done all the due-diligence and was on the point of closing. But that’s not what Trump told his guests—and partners!
Fascitelli recalled the apparent astonishment on Trump’s face as he pointed to the building, visible from his windows, and told his guests he had no idea it was for sale, and that, even if he had known, he wouldn’t have wanted it. “It’s a piece of shit building, the granite falling down, everything sucks,” Trump said.
But, within hours, the money was wired, and the building did in fact now belong to Trump and his new partner, Conseco.
Fascitelli said to Trump, “You fucking asshole.” Yet Fascitelli was good-humored about it. Why? Because he liked Trump and he understood: It wasn’t personal, it was business.
When I look back at the notes of all my meetings with Trump over the years, his exaggerations are so extraordinary I actually recall that, in the moment he uttered them, I felt sorry for him.
Here are a few nuggets:
“I’ve got a monopoly on golf courses in Florida.”
Then came:
“Mar-a-Lago is one of the most valuable—probably the most valuable—estate in the county, in the United States and maybe beyond.”
(Wikipedia puts Mar-a-Lago at the 20th largest mansion in the United States.)
And perhaps the best is:
“I honestly believe I have the finest properties in the world, I mean—and people don’t even know my properties, you know, ’cause I’m private, so nobody knows.”
Then again, perhaps you shouldn’t listen to me on the subject of Trump because after The Liar’s Ball came out, he decided to tweet: “Just finished reading a poorly written & very boring book on the General Motors Building by Vicky Ward. Waste of time!”
In his eyes, Letitia James is probably “even more boring” right now.
